Recommended Bucket Allocation
Liquidity Account
Immediate cash & money market for expenses
-
Income Account
Bonds & fixed income for medium-term
-
Growth Account
Stocks & equity for long-term growth
-
Transaction History
| Year |
Age |
Expenses |
Bucket 1 (Liquid) |
Bucket 2 (Income) |
Bucket 3 (Growth) |
Total Balance |
B2 → B1 |
B3 → B2 |
How the Three Bucket Strategy Works
Bucket 1 (Liquidity): Holds 1-2 years of expenses in cash or money market funds. This provides immediate access to funds regardless of market conditions.
Bucket 2 (Income): Contains 3-7 years of expenses in bonds and fixed income. This generates regular income to refill Bucket 1.
Bucket 3 (Growth): The remainder goes into stocks and growth investments. This bucket grows over time and replenishes Bucket 2 when needed.
Each year, you withdraw expenses from Bucket 1. If Bucket 1 drops below the target, refill it from Bucket 2. If Bucket 2 needs replenishment, transfer from Bucket 3. This strategy ensures you never have to sell growth assets during market downturns.
Disclaimer
This tool is for informational and educational purposes only and should not be construed as investment advice, an offer, solicitation, or recommendation to buy or sell any securities. Past performance is not indicative of future results. Investments in securities markets are subject to market risks. This calculator uses assumed rates of return and inflation; actual results may vary significantly. For personalized financial advice, please consult a qualified financial professional.